Solutia Seeks Approval to Sell Pharmaceutical Unit
St. Louis, October 29--Solutia Inc. is seeking bankruptcy court approval to sell a small, Seattle-based pharmaceutical services division, Axio Research Corp., before the unit is forced to liquidate, according to the St. Louis Post-Dispatch.
The company has found a buyer willing to pay $200,000 and assume liabilities valued at $231,000 in exchange for Axio, according to a motion filed Monday with U.S. Bankruptcy Court in New York.
In addition, the buyer agreed to pay Solutia 10 percent of Axio's profits that exceed $200,000 over the next three years.
The buyer, identified only as Axio Research Acquisition Co. LLC, is managed by one of Axio's former owners, the motion said. It intends to continue operating the business with "most, if not all" of the company's 31 employees. The deal is contingent upon its ability to retain key executives, including Chief Executive Lee Hooks, Chief Technical Officer Ruth McBride and Director of Business Development Jon Case.
Axio, which manages clinical trials for drug developers, has a client list that ranges from small biotech firms to universities and big companies, such as Abbott Laboratories and Bayer Pharmaceuticals Corp. Its annual sales, prior to Solutia's December bankruptcy filing, were "less than $4 million," the motion said.
Yet, since the bankruptcy, "Axio has learned that many of its customers have a firm policy of avoiding doing business with debtors operating under Chapter 11. Because most of its business is based on short term project contracts, this policy is preventing Axio from securing new business that will enable it to be cash flow positive and profitable."
Some employees have left because of the instability, and the company's financial condition is "dire," according to Solutia's motion. Axio's "liquidation and administrative insolvency are distinct possibilities, if not probabilities" if the business is not sold by Nov. 25, it said.
Solutia hired investment banker Rothschild Inc. to find potential buyers for Axio, either on its own or in combination with Solutia's much larger European Pharmaceutical Services Division. None was interested in lumping Axio with the European business; two bid on Axio alone.
Interested buyers may still bid on Axio in an auction Nov. 15 in New York, and Solutia will take the best deal, the filing said. Judge Prudence Carter Beatty will hear the motion on the sale Nov. 17.
As for the Pharmaceutical Services Division, which is not a party to the bankruptcy reorganization, Solutia said it is still considering options and "has not yet determined that a sale ... is the best course of action." In July, subsidiary Solutia Europe SA hired Rothschild to examine a possible sale.
Also in bankruptcy court, Judge Beatty on Tuesday ordered Solutia to maintain retiree medical benefits at 2004 levels. Solutia had planned to alter some coverage terms, including co-payments and coverage limits, to keep the retirees' health care plan in line with that of current employees.
The cost-cutting changes would have begun Jan. 1 and affected about 6,000 retirees and dependents, according to attorney Daniel Doyle of Spencer Fane Britt & Browne LLP, representing a retirees' committee to the Solutia reorganization.
Beatty ruled that Solutia will have to continue constant coverage, unless it seeks and obtains court approval to make changes.
